A financial expert from a D.C. think-tank says Iowa policymakers face a "major challenge" in balancing the state’s budget. Nick Johnson of the Center on Budget and Policy Priorities says Iowa is among 46 states facing a budget shortfall.
"Iowa’s shortfall is relatively small compared to other states, but it’s growing rapidly and I think it’s a major challenge for the state," Johnson says. Johnson testified before the Iowa Senate’s tax-writing committee on Thursday afternoon. Johnson encouraged legislators to avoid laying off government workers, or cutting too deeply into the state budget.
"You’re taking away money businesses and non-profit organizations that provide necessary services and that actually makes the recession worse. Fortunately, there are alternatives," Johnson said during an interview with Radio Iowa. "One alternative is to make use of the money that’s in the federal economic recovery bill which should be enacted in the next couple of weeks — which will contain a substantial amount of funds for Iowa for its budget."
Officials estimate the economic stimulus bill making its way through congress would provide one-and-a-half billion dollars to Iowa. Johnson warns the budget problems Iowa and other states face won’t be over soon. "The unemployment rate is still rising and is probably going to continue to rise for another six months to a year. That means that state revenues will suffer for another year to a year-and-a-half," Johnson said.
"People who’ve lost their jobs aren’t paying income taxes. Consumption is way down and that has an impact on sales taxes." Tax payments to the State of Iowa have dropped dramatically. December 2008 tax collections were 15 percent lower than in December of 2007.